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Net Equity Formula:
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Net equity represents the actual amount of money you would receive after selling your home, paying off the remaining mortgage balance, and covering all associated selling costs. It's the true financial gain from the sale of your property.
The calculator uses the net equity formula:
Where:
Explanation: This calculation gives you the actual cash you'll walk away with after the home sale transaction is complete.
Details: Calculating net equity is crucial for financial planning, determining your next home purchase budget, retirement planning, or making major financial decisions. It helps you understand your true financial position after a home sale.
Tips: Enter the expected sale price of your home, the current mortgage balance, and estimated selling costs. Selling costs typically include real estate commissions (5-6%), closing costs, repairs, and other fees (usually 6-10% of sale price).
Q1: What are typical selling costs?
A: Selling costs typically range from 6-10% of the sale price and include real estate agent commissions (5-6%), transfer taxes, attorney fees, and repair credits.
Q2: Should I include home improvements in selling costs?
A: Only include immediate pre-sale repairs and improvements. Major renovations done years earlier are not typically considered selling costs.
Q3: What if my mortgage balance is higher than the sale price?
A: This results in negative equity (short sale), meaning you'll need to bring money to closing or negotiate with your lender.
Q4: Are capital gains taxes included in selling costs?
A: No, capital gains taxes are separate. Most homeowners qualify for exclusion ($250,000 single/$500,000 married) if they've lived in the home 2+ years.
Q5: How accurate should my selling cost estimate be?
A: For planning purposes, estimate 7-8% of sale price. For precise calculations, consult with a real estate agent for local market specifics.